The Risk of Ruin Tables You Should Know

Many people will talk about their Risk-Reward ratios such as it’s important to have 2:1, 3:1, or whatever to one ratio, but this is just the tip of the iceberg of risk-management and leaves you uninformed and un-empowered.  You can actually have a 3:1 Reward-Risk ratio and lose all the money in your account.  You can also have a 1:1 Reward-Risk ratio and make money day in day out.

2ndSkies Forex Tip of the Iceberg Chris Capre

How can you understand the difference between the two?  Through the Risk-of-Ruin formula.

We did a 1hr webinar on Risk Management, the Risk of Ruin formulas and how critical they are, whether you are trading Price Action Strategies, Ichimoku Kinko Hyo, or any other system.

I got many requests for the information contained in the Risk of Ruin formulas so I am posting all the tables here so you can see the mathematics of your trading and whether you have the numbers in your favor.  Here they are below:

 

Risk of Ruin Formula using 10% Risk / Trade

ROR% with 10 capital at risk
Win Ratio %   Payoff Ratio 1:1   PR 2:1   PR 3:1   PR 4:1    PR 5:1
Win Ratio 10%    100 100 100 100 100
Win Ratio 15%    100 100 100 100 100
Win Ratio 20%    100 100 100 100 46.6
Win Ratio 25%    100 100 100 30.5 16.3
Win Ratio 30%    100 100 27.7 10.2 6.1
Win Ratio 35%    100 60.9 8.2 3.53 2.33
Win Ratio 40%    100 14.2 2.5 1.24 0.888
Win Ratio 45%    100 3.41 0.761 0.426 0.329
Win Ratio 50%    100 0.813 0.226 0.141 0.116
Win Ratio 55%    13.4 0.187 0.0635 0.0438 0
Win Ratio 60%    1.73 0.0401 0 0 0
Win Ratio 65%    0.205 0 0 0 0
Win Ratio 70%    0 0 0 0 0
Win Ratio 75%    0 0 0 0 0
Win Ratio 80%    0 0 0 0 0
Win Ratio 85%    0 0 0 0 0
Win Ratio 90%    0 0 0 0 0

 

Risk of Ruin Formula using 5% Risk / Trade

ROR% with 5 capital at risk
Win Ratio %   Payoff Ratio 1:1   PR 2:1   PR 3:1   PR 4:1    PR 5:1
Win Ratio 10%    100 100 100 100 100
Win Ratio 15%    100 100 100 100 100
Win Ratio 20%    100 100 100 100 21.7
Win Ratio 25%    100 100 100 9.33 2.67
Win Ratio 30%    100 100 7.67 1.03 0.372
Win Ratio 35%    100 37.1 0.672 0.124 0.0544
Win Ratio 40%    100 2.03 0.0623 0 0
Win Ratio 45%    100 0.116 0 0 0
Win Ratio 50%    100 0 0 0 0
Win Ratio 55%    1.81 0 0 0 0
Win Ratio 60%    0 0 0 0 0
Win Ratio 65%    0 0 0 0 0
Win Ratio 70%    0 0 0 0 0
Win Ratio 75%    0 0 0 0 0
Win Ratio 80%    0 0 0 0 0
Win Ratio 85%    0 0 0 0 0
Win Ratio 90%    0 0 0 0 0


Risk of Ruin Formula using 2% Risk / Trade

ROR% with 2 capital at risk
Win Ratio %   Payoff Ratio 1:1   PR 2:1   PR 3:1   PR 4:1    PR 5:1
Win Ratio 10%    100 100 100 100 100
Win Ratio 15%    100 100 100 100 100
Win Ratio 20%    100 100 100 100 2.2
Win Ratio 25%    100 100 100 0.266 0
Win Ratio 30%    100 100 0.163 0 0
Win Ratio 35%    100 8.37 0 0 0
Win Ratio 40%    100 0 0 0 0
Win Ratio 45%    100 0 0 0 0
Win Ratio 50%    100 0 0 0 0
Win Ratio 55%    0 0 0 0 0
Win Ratio 60%    0 0 0 0 0
Win Ratio 65%    0 0 0 0 0
Win Ratio 70%    0 0 0 0 0
Win Ratio 75%    0 0 0 0 0
Win Ratio 80%    0 0 0 0 0
Win Ratio 85%    0 0 0 0 0
Win Ratio 90%    0 0 0 0 0

 

Risk of Ruin Formula using 1% Risk / Trade

ROR% with 1 capital at risk
Win Ratio %   Payoff Ratio 1:1   PR 2:1   PR 3:1   PR 4:1    PR 5:1
Win Ratio 10%    100 100 100 100 100
Win Ratio 15%    100 100 100 100 100
Win Ratio 20%    100 100 100 100 0.0485
Win Ratio 25%    100 100 100 0 0
Win Ratio 30%    100 100 0 0 0
Win Ratio 35%    100 0.701 0 0 0
Win Ratio 40%    100 0 0 0 0
Win Ratio 45%    100 0 0 0 0
Win Ratio 50%    100 0 0 0 0
Win Ratio 55%    0 0 0 0 0
Win Ratio 60%    0 0 0 0 0
Win Ratio 65%    0 0 0 0 0
Win Ratio 70%    0 0 0 0 0
Win Ratio 75%    0 0 0 0 0
Win Ratio 80%    0 0 0 0 0
Win Ratio 85%    0 0 0 0 0
Win Ratio 90%    0 0 0 0 0

 

Hopefully after viewing the Risk of Ruin mathematics, you will begin to look at your trading differently, analyze whether you have the mathematics in your favor to make money day in day out, or are setup to lose money. Understanding the mathematics of risk can make all the difference in the world so make sure you study these numbers in relation to trading your rule-based system.

We have a Risk of Ruin Calculator available here, for your convenience.

Remember to leave us your comments which are always appreciated, and also to click the ‘Like’ and ‘Tweet’ buttons below to share it.

Buddhist, Trader and Philanthropist

I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.

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  • jano

    Hi,

    as far as I remember, you have changed the name of tables cause it was pessimistic to ‘success rate’ or similar, no?

    thanks for publishing!

    • Hello Jano,

      It is still called the same ‘Risk of Ruin’ formula as it was called in the prior article so not sure what you are referring to.

      Kind Regards,
      Chris

      • jano

        Hello again,

        referring to webinar excell sheets, remember?

        What its mean to bring awerneness down to ‘heart’ or to the brains or between eye zone, think about mentioned regions?
        How to ‘move’ awareness, could you say it in other words?

        All the Best,
        Jano.

      • Ahh – well, I even said this in the webinar of why I referred to an alternate name.

        How to move awareness? Not too difficult…think about your right hand right now. Move your awareness and sensations
        towards it, look at it carefully, inspect it with a relaxed awareness. Feel it. And voila!

        You have just moved it.

        But that is a basic way to do it.

        Some examples of it would be – ever had something hurt really bad, like your foot after kicking something hard, or your heart after an emotional breakup? Noticed how your awareness is much more concentrated in those areas? That is directing awareness.

        Bringing awareness down into the heart means to really connect with your heart or yourself on a heart level, not just being stuck in your head. Have you ever had an argument with someone who was so fixated on their ideas, or them being right, that they were missing the big picture, that they were arguing just to be right, even though it sounded really dumb? That is being stuck in ones head, and not connected to one’s heart. The mind divides, the heart does not.

        My guess is – if you are asking how to bring awareness down to your heart, then you have not fully connected to either a) your heart, or b) your awareness or c) both, as you will realize its not a mental thing – but a full body, energy, perception thing.

        Best is to start by building one’s awareness, either through yoga, meditation, tai chi/chi gong, those are practices to help build one’s awareness. You can try by going for a walk in a city, or in a park, and open your sense fields, get out of your mind thinking, and just sense the stimuli via all your senses, not what you think about it, but what you sense from them. This will activate a more sensory experience and help to build awareness.

        Hope this helps
        CC

      • Brian

        Hi Chris
        Best explanation Ive read
        Now stuck to the wall and the first thng I refer anyone too!
        Cheers

      • Hello Brian,

        Yeah, not many people talk about or work with the risk of ruin tables, so glad you caught onto it.

        Kind Regards,
        Chris

  • JS

    Hi Chris

    I was wondering if these numbers assume compounding your profits and adjusting position size to reflect account size?

    • Helll JS,

      It actually does not matter your account size because the tables are based upon % equity at risk of your account, so regardless, its factored in.

      Hope this clarifies it.

      Kind Regards,
      Chris

  • vinny

    Hello Chris
    I am trying to work out the risk of ruin on a system producing

    51.7% wins
    28% loss
    20.3% B/Even
    Risk per trade 1%

    average win 1RR
    Average loss 1RR
    taken over sample of circa 2500 trades

    If you could advise or send me a spreadsheet if you have one I would be appreciative

    Regards

    • Hello Vinny,

      I don’t have a spread sheet that is tailored for specific strategies. It is only a program that you plug in the equity % risk, and it churns out the data regard to accuracy levels every 5%. So I apologize, but my program will not help with this.

      But, if you do some simple math, as long as your targets are well over the size of the spread, in reality, you can scratch all the BE trades as losses for the spread (unless you add the spread into the BE calculation), so in reality, this system is not 51.7% accurate, but more like 2/3 accurate since the total trades either win or loss is about 2 out of every 3.

      So I cannot say for sure, but upon a simple guess, it should be profitable as long as you are not risking more than a few %.

      Hope this helps.

      Chris

  • geremiah

    Hello Chris,
    I would like to ask if you don’t mind…by “10% risk per trade” do you reffer to stop loss worth of 10% of the account?thank you

    • Hello Geremiah,

      Correct, the Risk of Ruin needs the % equity risk per trade to create the tables, so I did various calculations to demonstrate how the different levels of risk per trade play out.

      Hope this helps.

      Kind Regards,
      Chris

  • geremiah

    Hello Chris,
    I would like to ask a question,if you don’t mind.
    I am 19,I am from Romania,and I started trading currencies about 3 years ago.The problem is I do not have enough money for,let’say,a 10k account.A have very little,much little.As far I can see,I’m trading at a 50% accuracy,with generally 2:1 payoff ratio,but I take profits too early when I have winning trades.And after 3-4 wins in a row,I’m not concentrated anymore and some losses encounter.In regard to this things,do you think I should stop trading until I can afford to have a bigger account, until I develop the skills needed for trading succesfully,and until I remove all the bag habits and limiting beliefs?Thanks in advance.
    Yours,
    Geremiah

    • Hello Geremiah,

      Some good questions.

      If you are taking profits too early, then you will want to do a few things;
      1) check to see what your average R:R is
      2) then once you have this, calculate the amount you can risk per trade, based on your baseline accuracy and R:R levels. You can find this via the Risk of Ruin tables
      to see what’s your maximum while having a 0% chance of blowing up your account.
      3) trade mini lots if you need to. These are small enough to where you could easily trade live, while still keeping risk contained.

      So reduce position size to reduce risk.

      But also spend time looking into why you take profits too early, what are the underlying reasons, then see if you can correct them.

      Hopefully this helps give you some ideas, but keep trading live if you can.

      Kind Regards,
      Chris Capre

  • geremiah

    The reason for taking profits too early I think is fear.I think that I have a belief in my mind that I need to have just winning trades to be succesfull and everytime a loss appears,same does fear.

  • Soma

    Thank your for the great tables!

  • Iwan Ismail (@iwanismail)

    Hi Chris,

    In the article, you mentioned about a 1-hour webinar on money management. Where can I find this webinar? Thanks!

  • tjenarvi

    Dear Chris,

    I read this like more than 5x times, combine with the following article https://2ndskiesforex.com/forex-trading-strategies/forex-strategies/your-equity-threshold-and-the-psychology-of-money/

    I read that more than 5x times too, to make sure I understand every sentences you have I enjoyed it very much, it’s a great article to enlight my mindset.

    Question, just to reaffirm and reassure my understanding:
    – Should we better to always risk our 2% per trade dynamically calculated based on our current capital? Say, we have 10k, 2% is $200, end up $9,800 if we loss. Then for the next trade, we should count the 2% risk from $9,800, right?

    – Would it be also work to always the same risk 2% per trade based on our first deposited capital ?? let’s say 10k of account, then per trade is always $200.

    Thanks.

    Best

    Best

    • Chris Capre

      Hello Tjenarvi,

      I’m glad you are getting into this article as its a potent one many people tend to ignore, bypass, or barely pay attention to.

      RE: Your Questions
      Make sure to ask them in the members forum and I’ll get to it there.

      Kind Regards,
      Chris Capre

  • tjenarvi

    I had asked the question into the forum, and someone from senior members already answered to me, it’s really good, thanks.

  • John A

    Can this be true – I’ve spent Half a day viewing your trades and as yet I haven’t seen you loose – does it happen to you? and how do you cope with the ‘novel’ experience?

    • Chris Capre

      Hello John,

      Of course I lose – it’s part of trading. That would be like a basketball player making every basket.

      As to ‘coping’ with losses – as stated above, it’s part of the game and you have to learn to let the math and your edge play out.

      Second, ‘coping’ is only one aspect of a successful traders mindset. You have to learn to go beyond just ‘coping’ and build mental toughness.

      Food for thought and if you want to learn more about this, check out my advanced traders mindset course.

      Kind Regards,
      Chris Capre

  • Michelle

    Hi Chris, thank-you for your article. As simple as the Risk of Ruin formula looks, risk_of_ruin = ((1 – Edge)/(1 + Edge)) ^ Capital_Units, I am having difficulty in actually getting it to calculate values as shown in your tables above.

    May I ask that you please write out the calculation for Risk of Ruin for, say:
    * 1% Risk per Trade,
    * PR 2:1
    * Win Ratio 35%
    (in the table above risk of ruin is said to be 0.701)

    Thanks in advance

    • Chris Capre

      Hola Michelle,

      I had my programmers put the risk of ruin calculator together to do the calcs.

      But if the RoR is .701, that is incredibly low. I’m guessing a few % increase in accuracy would bring it to 0.

      Kind Regards,
      Chris Capre